Capitalization  and  Dividends  of 
the  Railways  of  Texas 
Year  Ending  June  30,  1909 


WASHINGTON,  D.  C. 
AUGUST,  1911 


Digitized  by  the  Internet  Archive 
in  2016 


https://ar9hive.0rg/detaij s/capitalizationdiOlasso 


9 


Vo,  I ^ 

/ X-  >x.  o 

CAPITALIZATION  AND  DIVIDENDS  OF  THE 
RAILWAYS  OF  TEXAS. 

In  this  study,  prepared  by  request,  it  has  been  the  purpose 
to  ascertain  the  capitalization  of  the  railways  of  Texas,  their 
dividends,  and  the  proportion  of  non-dividend-paying  stock, 
and  to  make  a comparison  in  these  respects  with  the  railways 
of  the  United  States  as  a whole,  and  with  those  of  other  sec- 
tions of  the  United  States. 

The  study  is  for  the  fiscal  year  ending  June  30,  1909,  the 
latest  year  for  which  requisite  statistics  are  available.  The 
data  has  been  obtained  from  the  annual  report  of  the  Railroad 
Commission  of  Texas  and  the  statistical  report  of  the  Inter- 
state Commerce  Commission. 

From  the  table  which  is  printed  hereafter  with  explanatory 
comment,  it  will  be  perceived  that  the  capitalization  of  the 
Texas  roads  per  mile  is  $32,070,  or  less  than  half  the  average 
for  the  whole  United  States,  which  is  $73,829.  It  is  of  interest 
to  compare  this  further  with  Interstate  Commerce  Commission 
Group  V,  which  has  the  lowest  capitalization  per  mile,*  $46,364, 
and  with  Group  II,  which  has  the  highest  capitalization  per 
mile,  $147,300.  It  should  be  noted  that  these  amounts  repre- 
sent the  gross  capitalization  per  mile,  in  which  are  included 
duplications  due  to  intercorporate  ownership.  The  net  capi- 
talization of  the  railways  of  the  United  States  as  a whole,  that 
is,  the  gross  capitalization  less  deductions  due  to  the  ownership 
of  the  securities  of  one  railway  by  another,  and  less  deduction 
of  securities  covering  property  other  than  railway  property, 
is  $59,259  per  mile.  The  net  capitalization  of  the  railways 
in  each  group  or  in  each  state  is  not  ascertainable.  It  has 
therefore  been  necessary  in  this  comparison  to  use  the  figure 


*In  the  comparisons  of  Texas  with  the  various  groups,  Group  IX  is  omitted 
from  consideration,  because  the  State  ot  Texas  comprises  the  major  part  of 
Group  IX  and  largely  determines  its  character. 


P 8 1 5 0 8 


4 


of'  gross  capitalization.  While  it  is  likely  that  the  net  capitali- 
zation of  the  railways  of  Texas,  if  it  were  ascertainable,  would 
not  show  the  same  relative  reduction  from  the  gross  as  that  of 
the  United  States  as  a whole,  it  is  significant  that  the  gross 
capitalization  per  mile  of  the  Texas  lines  is  45  per  cent  less 
than  the  net  capitalization  per  mile  of  the  railways  of  the 
country  as  a whole. 

On  the  same  basis  of  comparison  of  gross  figures,  the  table 
shows  that  the  amount  of  stock  per  mile  is  $9,839  in  Texas, 
$32,450  for  the  United  States  as  a whole,  $15,495  in  the  lowest 
group  (Group  V),  and  $65,456  in  the  highest  group  (Group  II). 
The  amount  of  bonds  per  mile  is  $22,231  for  Texas,  $41,380  for 
the  United  States,  $30,869  for  Group  V,  and  $81,844  for 
Group  II. 

The  average  rate  of  dividend  on  railway  stock  is  lower  in 
Texas  than  elsewhere.  The  average  dividend  paid  in  1909  on 
the  aggregate  of  dividend-paying  and  non-dividend-paying 
stock  was  less  than  three-tenths  of  one  per  cent.  On  the  simi- 
lar aggregate  of  stock  for  the  entire  United  States,  the  divi- 
dend rate  averaged  4.2  percent.  In  the  lowest  group  (Group 
IV)  this  dividend  rate  averaged  1.6  percent,  and  in  the  highest 
group  (Group  VII)  6.8  percent.  That  is,  the  average  dividend 
rate  on  the  total  railway  stock  of  the  United  States  was  more 
than  seventeen  times  as  high  as  that  of  Texas ; in  Group  IV  it 
was  over  six  times  as  high,  and  in  Group  VII  twenty-eight 
times  as  high. 

The  low  dividend  rate  on  Texas  stock  would  lead  one  to 
expect  that  the  proportion  of  railway  stock  paying  no  divi- 
dends would  be  higher  in  Texas  than  in  the  country  as  a whole. 
This  proves  to  be  the  fact  to  an  extraordinary  degree.  The 
ratio  that  the  stock  of  non-dividend-paying  railways  bore  to 
the  stock  of  all  railways  was  95.8  percent  in  Texas,  in  the 
United  States  as  a whole,  29  percent,  in  the  group  with  the 
highest  ratio  (Group  IV)  58.7  percent,  and  in  the  group  with 
the  lowest  ratio  (Group  I)  6.7  percent.  It  should  be  noted  that 
for  reasons  given  later  in  the  discussion  of  the  table,  this  com- 
parison of  the  proportion  of  stock  not  paying  dividends  is 


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based  on  the  total  stock  of  dividend  paying  roads  compared 
with  the  total  stock  of  non-dividend-paying  roads,  and  not  on 
the  issues  of  stock  paying  dividends  compared  with  the  issues 
of  stock  that  paid  no  dividends. 

Certain  discrepancies  exist  between  the  data  published  by 
the  Texas  Railroad  Commission  and  that  published  by  the 
Interstate  Commerce  Commission.  If  the  higher  figures  given 
by  the  Interstate  Commerce  Commission  had  been  used  as  the 
basis  for  the  foregoing  comparison,  instead  of  the  lower  fig- 
ures of  the  Texas  Commission,  the  amounts  entering  into  the 
comparison  would  have  been  but  little  changed,  and  the  rela- 
tion between  the  status  in  Texas  and  that  in  other  parts  of  the 
country,  not  at  all.  Therefore  it  has  not  seemed  necessary  to 
present  these  discrepancies  in  the  summary. 


P61508 


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Capitalization  and  Dividend  Returns  of  the  Railways  of  Tex  , 

Year  endin  . 


(United  States  and  Group  figures  from  Statistical  Re 
Texas  figures  from  1909  report  of  It' 


GROUP. 

Mileage 

Owned. 

Stock. 

Bonds. 

Amount. 

Per 

Mile. 

Amount. 

Per  Mile. 

Texas 

13,079.41 

$128,686,677 

$9,839 

$290,768,6265 

$22,231 

United 

States.. 

236,868.53 

7,686,278,545 

32,450 

9,801,590,390 

41,380 

Group  I 

7,950.14 

324,754,673 

40,849 

445,333,910 

56,016 

< < 

II 

23,236.94 

1,520,991,520 

65,456 

1,901,806,200 

81,844 

III... 

24,880.48 

997,639,248 

40,097 

1,310,905,552 

52,688 

4 < 

IV.. 

14,880.97 

396,395,222 

26,638 

553,027,315 

37,163 

i ( 

V 

28,377.26 

439,709,547 

15,495 

875,969,066 

30,869 

4 i 

VI ... 

50,190.75 

1,398,398,631 

27,862 

1,594,510,949 

31,769 

i 4 

VII .. 

13,638.76 

407,959,786 

29,912 

426,517,621 

31,272 

4 4 

VIII. 

32,450.48 

883,554,572 

27,228 

1,297,095,370 

39,971 

4 4 

IX.. 

18,162.90 

318,121,840 

17,515 

448,028,456 

24,667 

4 4 

X 

23,099.85 

998,753,506 

43,236 

948,395,951 

41,056 

a The  figures  exclude  switching  and  terminal  companies. 
b Includes  equipment  trust  obligations  amounting  to  $7,956,426. 
c Includes  $25,666,134  held  in  treasury,  pledged  as  collateral  secu  : 


as  follows : 

Group  I 

$29,749 

Group  I"' ! 

“ II 

8,327,444 

“ V 

“ III 

9,152,575 

“ V 

; 


u i of  the  United  States  as  a whole,  and  of  the  several  groups: 
Hj'UNE  30,  1909. 

Sa  »rt  of  the  Interstate  Commerce  Commission  for  1909 ; 
tl  Texas  Railroad  Commission). a 


>tal  Railway  Capital- 
ization. 

' 

Dividends  Declared 
in  1909. 

Total  Stock  of  Railways 
which  Paid  No  Dividends 
in  1909 

ij  Amount. 

Per  Mile. 

Amount. 

Average 
Rate  Based 
on  Total 
Railway 
Stock  of 
Group. 

Amount. 

Percent  of 
Total  Stock 
of  All  Rail- 
ways of 
Group. 

1 419,455,3035 

$32,070 

$307,850 

0.24 

$123,337,265 

95.8 

. .487,868,935 

73,829 

321,071,626 

4.2 

2,227,650,417c 

29.0 

« 770,088,583 

96,865 

19,575,320 

6.0 

21,739,094 

6.7 

4 ,422,797,720 

147,300 

71,484,423 

4.7 

420,996,237 

27.7 

J 308,544,800 

92,785 

35,153,385 

3.5 

368,252,631 

36.9 

! 949,422,537 

63,801 

6,471,801 

1.6 

232,639,792 

58.7 

9 315,678,613 

46,364 

9,251,150 

2.1 

253,874,556 

57.7 

9 992,909,580 

59,631 

67,187,584 

4.8 

241,928,577 

17.3 

t:  834,477,407 

61,184 

27,793,005 

6.8 

28,166,800 

6.9 

li  180,649,942 

67,199 

25,029,670 

2.8 

232,382,171 

26.3 

1 766,150,296 

42,182 

4,681,471 

1.5 

211,028,138 

66.3 

6,  947,149,457 

84,293 

54,443,817 

5.5 

216,642,421 

21.7 

art,  held  in  sinking  and  other  funds,  etc.  Amounts  assigned  to  groups  are 


IT  1,948,900 


744,720 

603,285 


Group  VII  $1,500 

“ VIII  2,486,386 

“ IX  155,675 

“ X 2,215,900 


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The  amount  given  in  the  table  as  representing  the  stock  of 
all  American  railways  on  which  no  dividend  was  declared  in 
1909  is  $2,227,650,417,  or  29  percent  of  the  total  stock  outstand- 
ing. This  amount  is  ascertained  by  adding  together  the  total  out- 
standing stocks  of  all  railways  that  declared  no  dividends  in 
1909.  The  corresponding  item  in  the  Interstate  Commerce  Com- 
mission ’s  statistical  report  for  1909,  page  57,  is  $2,766,104,427, 
and  the  corresponding  percentage  35.-99  percent.  The  discrep- 
ancy between  these  two  sets  of  figures  is  due  to  the  fact  that 
the  Interstate  Commerce  Commission  added  together  all  issues 
of  stock  on  which  no  dividends  were  paid,  instead  of  the  total 
stocks  of  all  railways  declaring  no  dividends.  Thus  the  Inter- 
state Commerce  Commission’s  total  includes  a considerable 
amount  of  common  stock  of  railways  that  paid  a dividend  on 
their  preferred,  but  not  on  their  common  issues.  It  has  proved 
impossible  to  secure  from  the  Interstate  Commerce  Commis- 
sion or  from  its  reports  a statement  of  non-dividend-paying 
stocks  in  each  group  corresponding  to  the  amount  reported  by 
the  Commission  for  the  United  States,  which  has  made  it  neces- 
sary to  make  up  the  item  in  the  way  described.  For  com- 
parative purposes  this  data  is  as  valuable  as  that  of  the  Inter- 
state Commerce  Commission,  for  it  gives  information  of  the 
capitalization  of  railways  paying  no  dividends  whatever  on 
their  capital  stock. 

Switching  and  terminal  companies  have  not  been  included  in 
the  statistical  reports  of  the  Interstate  Commerce  Commis- 
sion since  1907.  In  order  to  make  the  statistics  comparable, 
these  companies  have  been  omitted  from  the  Texas  figures. 

Certain  differences  exist  between  the  returns  of  the  Inter- 
state Commerce  Commission  when  computed  for  the  state  of 
Texas  and  those  of  the  Texas  Railroad  Commission.  These 
differences  fall  into  three  main  groups — differences  due  to 
variations  in  classification,  differences  arising  out  of  the  failure 
of  roads  to  file  reports,  and  differences  in  methods  used  in 
apportioning  capital  to  those  portions  of  interstate  railways 
that  lie  within  the  state  of  Texas.  Among  the  differences  due 
to  varying  classification  may  be  mentioned  the  inclusion  of 


9 


notes,  debentures,  pledged  bonds,  and  miscellaneous  obligations 
with  funded  debt,  and  the  inclusion  of  branches  and  spurs  with 
miles  of  line.  For  all  the  roads  failing  to  file  operating  state- 
ments with  the  Interstate  Commerce  Commission,  mileage 
figures  are  reported  by  that  Commission,  but  nothing  more. 
Differences  due  to  methods  of  capital  assignment  are  as  fol- 
lows. Where  a railway  lies  in  more  than  one  group,  the 
Interstate  Commerce  Commission  usually  apportions  the  cap- 
italization of  such  road  among  the  several  groups  in  the  pro- 
portion of  the  mileage  lying  within  the  respective  groups.  The 
Texas  Railroad  Commission,  however,  apportions  the  capitali- 
zation of  each  railway  entering  or  passing  through  the  state  on 
its  own  merits  ; that  is,  on  the  basis  of  what  it  considers  to  be 
the  proper  valuation  of  that  part  of  the  railway  lying  in  Texas. 
As  the  tendency  of  the  Texas  Commission  is  always  toward  a 
low  valuation,  it  is  not  strange  that  it  assigns  a lower  capitali- 
zation to  the  Texas  portion  of  the  interstate  railways  than 
does  the  Interstate  Commerce  Commission. 

This  study,  the  method  of  which  was  determined  in  the 
request  for  its  preparation,  was  based,  as  already  shown,  upon 
the  Texas  Railroad  Commission’s  figures.  Yet  the  discrepan- 
cies between  the  Texas  Commission  figures  and  the  Interstate 
Commerce  Commission  figures,  the  reasons  for  which  have 
already  been  explained,  are  not  sufficient  to  vitiate  in  any 
respect  the  conclusions  of  this  study.  It  does  not  therefore 
seem  worth  while  to  present  in  detailed  tables  the  statistical 
variations  in  the  two  reports. 


Date  Due 


I upBI 


'3 

Form  335— 35M— 9-34— C.  P.  Co. 

385  B952B  no. 18 


P61508 


Bunsnu.  of  Pistil  wny  Economics 


Q apl  ~t  alfciz  all  op.  ntid 

Dividends  of  tlio  liail^ays. . 


B952B  no. 18 


PS1508 


